New “spending squad” should oversee all large public investment
projects

Squandering of public funds in ill-conceived investment projects has always
been a big problem for Czech state administrations. Now the centre-left
government is setting up a watchdog body which should assess the necessity
for major investments and make sure that the money is spent according to
plan.

Photo: Filip Jandourek
Two billion crowns of state funds invested into the Liberec winter
cross-skiing championship or the vastly overpriced judicial palace in Brno
are just two examples of over-generous public spending that, with
hindsight, elicited criticism both from political circles and the public.
Every past government in office has thrown money down a black hole and the
present administration which has emphasized the need to improve control
over public spending, is setting up what is jokingly referred to as the
“spending squad”, a watchdog body that should bring an end to this
practice.

The spending squad will oversee all big public investment projects from
start to finish –for instance assess the construction of a new road or
building, judge the real need for them, consider other technical and
financial alternatives, and once approved supervise the project through to
its conclusion to make sure that the concept does not change half-way
through and the money is used according to plan. An independent expert
appraisal from this body should also prevent problems such as that which
occurred during the reconstruction of the D1 motorway last year when the
investor underestimated the extent of repair-work that needed to be
undertaken and the costs unexpectedly soared, bringing repair work to a
halt for weeks as the two sides argued over pricing.

The spending supervision should cover all public investment projects over
a certain sum, which has yet to be set. Among the proposed thresholds on
the table is for any sum over 300 million crowns, but the final decision
rests with the governing coalition. The rules regarding the status, rights
and duties of this supervisory body are now being drafted jointly by the
Ministry of Trade and Industry and the Ministry for Regional Development.
Originally the idea was to tighten supervision over large construction
projects which have proved the most problematic in recent years, but in
view of problems in all investment areas the government wants
across-the-board supervision of public spending.

Parliament has long called for tighter supervision on public spending and
the idea has won strong backing from the Union of Entrepreneurs in the
Construction Industry who claim that ill-conceived government projects
frequently result in additional costs and court disputes. Once a project
has been approved by the government on the recommendation of the said
supervisory body any price increase will have to be consulted with the
“spending squad” which –if not satisfied with the arguments presented
– may order an audit into the project. While smaller investment projects
may be approved by individual ministers, large investments involving
hundreds of millions of crowns will have to be approved by the whole
cabinet.

The “spending squad” should not only prevent public funds being spent
on nonsensical or overblown projects but in cutting the cost of realized
projects it should save money from state coffers and help the finance
minister balance the books.